The euro tumbled under $1.41 at one stage today as worries mounted over the outlook for the European economy. Traders blamed the latest fears on weak German economic data and Greece's financial crisis.
The European single currency reached its lowest levels since August, and stood at $1.4104 this evening after earlier hitting $1.4090. The euro also fell against sterling, to 86.6 pence.
Analysts said the euro was now being shunned in favour of the dollar, despite persistent weakness in the US economy.
International rating agency Moody's yesterday said it was maintaining a negative outlook on Greece because it was unclear whether the government could implement a plan to shore up public finances.
The Greek government, which last month suffered a credit downgrade from all three leading ratings agencies, is struggling to overcome a huge debt and public deficit that have sparked concern among its euro zone partners.
In Germany this week, investor sentiment fell for a fourth month running in January, according to the ZEW economic research institute said.
ECB will not bend rules for Greece - Stark
The European Central bank will not bend its rules to help countries like Greece resolve debt and deficit crises, chief ECB economist Juergen Stark stressed today.
'Greece knows that it must do its homework,' Stark said during a university lecture in Leipzig, eastern Germany. 'As the ECB president Jean-Claude Trichet recently declared, we will not modify our rules,' Stark added.
The economist said that the government in Athens must make a fundamental change in economic policies and comprehensive fiscal consolidation its top priority.
Greece has a public spending deficit that rose to 12.7% of output last year, far above the 3% ceiling for euro zone countries. It is also saddled with a debt constituting 113% of gross domestic product (GDP).
